Lyft, Inc. (LYFT) is a ride hailing company that primarily operates in the US and Canada. LYFT’s revenue market share as of 2022 stood at 29% in the US market. LYFT’s Ridesharing marketplace connects drivers and riders. Express Drive program allows drivers to enter into short-term rental agreements with a third party for vehicles used to provide ridesharing services. Lyft Rentals is a consumer offering for users who want to rent a car for a fixed period.

Investment Overview

LYFT faces competitive hurdles in battling UBER's dominance. Smaller scale and focus on North American (NA) Rideshare market limit cross-sell opportunities and reinvestment capabilities for LYFT. Being the second-largest player after UBER (who holds 70% market share), LYFT faces structural competitive disadvantages due to UBER's extensive presence across 70+ countries and diversified business units (Mobility, Delivery, Freight). UBER's superior scale and network effect have further magnified LYFT's challenges who lost market share by 300bps during 2022. To gain market share from UBER, LYFT must focus on product differentiation and build greater brand awareness, while also addressing the innovation gap between the two companies.

Far slower growth prospects of only 10% EBITDA CAGR over FY22-25F vs 66% CAGR at UBER. Street expects EBITDA CAGR of 10% over FY22-25F, lower than UBER’s 66%. UBER’s higher growth expectations is due to an expansion of its margins in both the Delivery and Mobility segments while LYFT’s growth is primarily from its Mobility segment which achieved EBITDA breakeven in FY21. Lower EBITDA growth for LYFT is due to 36% y-o-y decline in EBITDA forecast for 2023, due to (i) LYFT raising driver incentives (ii) lowering prices to match UBER and (iii) severance cost. Overall, street projects LYFT’s EBITDA margin to drop to 5% in FY23 and rise to 8% in FY25 (vs UBER’s margin of 10% in FY23F to 15% in FY25F).

LYFT's booked its first net income in 2Q24 with strong adj.EBITDA numbers and guidance. Active riders were 23.7mn (+10% y/y), already above pre-pandemic levels (22.9mn in 4Q19). LYFT booked its first net profit of USD5mn in 2Q24, driven by +73% q/q improvement on its Adj.EBITDA to USD102.9mn. The management expect this strong quarterly adj.EBITDA to continue in 3Q24F, as they guided adj.EBITDA of USD90-95mn for 3Q24F (approximately 2.3% adj.EBITDA margin). The company expect the strength on its gross bookings to continue at USD4.0-4.1bn in 3Q24F (c.+10% y/y improvement).

If the ride hailing recovery pauses or reverses, the chance of LYFT retaining positive EBITDA in the short term declines, leading towards lower projections by consensus. The other significant risk is that it presently operates only in the US and Canada where UBER holds a 71% market share and is not as diversified as UBER.A surge in demand coupled with an expansion in market share, alongside a decrease in driver incentives, would serve as significant drivers for the company's stock price.

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